Social cognition entails both cognitive and affective processing, and impairments in both have accounted for residual symptoms of bipolar disorder (BD). However, there has been a lack of studies identifying neural substrates responsible for social cognitive difficulties in BD patients. Fourteen euthymic BD patients and 14 healthy normal controls underwent functional MRI while performing a virtual reality social cognition task, which incorporated both cognitive and emotional dimensions, simulating real-world social situations. During the scanning, subjects tried to guess (attribute) possible reasons for expressed emotion of virtual humans (avatars) while viewing their facial expressions, just after observing their verbal and nonverbal (facial) expressions which were emotionally valenced (happy, angry and neutral). BD patients compared to normal controls showed delayed reaction times in emotional conditions, with comparable response accuracy. Healthy normal controls activated the right anterior cingulate cortex, inferior frontal, and insular cortex in emotional conditions contrasted with neutral control conditions, that is, the regions that have been related to empathic processes during viewing others' emotional expression. Relative to normal controls, BD patients showed reduced activations in the 'mirror neuron system', including the right inferior frontal cortex, premotor cortex, and insula, mainly in angry or happy condition. These results may suggest that, even during euthymic state, BD patients have difficulties in recruiting brain regions for the utilization of emotional cues as a means for understanding others. Clinical attention should be paid to emotion-related residual symptoms to help improve social outcomes in these patients.